Inspector general resigns, 3 other state employees put on paid leave

AUSTIN - The embattled inspector general of the Texas Health and Human Services Commission resigned Friday at the behest of Gov. Rick Perry as formal investigations into a widening controversy over a company that received $110 million in no-bid contracts got underway.

Also Friday, three commission employees, including the wife of the inspector general and the chief of staff of Executive Commissioner Kyle Janek, were placed on paid leave for the duration of the investigation.

"Ongoing questions regarding the awarding of contracts at the Texas Health and Human Services Commission have caused the governor to lose confidence in Wilson's ability to carry out the important oversight responsibilities of this office," Nashed said.

Within minutes, Janek announced the paid leave of the three employees during investigations by the State Auditor's Office and the Travis County District Attorney's office into the contracts with Austin technology firm 21CT.

Those put on leave were: Wilson's wife, Frianita Wilson, who played a role in approving one of the contracts; Janek's chief of staff, Erica Stick, who is married to Jack Stick, the official who signed the largest of the contracts the state now says were awarded unfairly; and Cody Cazares, Jack Stick's former chief of staff.

Jack Stick submitted his resignation last week and served his last day as a state employee Thursday.

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Stick this year had served as the health commission's top lawyer, but worked as Wilson's deputy when the first of the contracts was approved in 2012.

Health commission spokeswoman Stephanie Goodman said the wives of Wilson and Stick were placed on leave to preserve the integrity of the investigations although there was "not even a hint of wrongdoing on their parts."

Feds asked to step in

Meanwhile, late in the day, state Rep. Garnet Coleman said he had requested an investigation by the U.S. Department of Health and Human Services.

A spokesman for the federal government, which paid for a large portion of the contracts, said earlier this week that it was working with the state to determine any appropriate next steps or actions.

"What's important to me is that we have as many eyes on it as we can," said Coleman, D-Houston.

The developments added to a scandal that has enveloped the Capitol over the past week.

It started last Friday, when Janek said concerns about favoritism had led him to cancel two contracts, both of which went through a no-bid process that was designed for small technology purchases.

The process, called the Cooperative Contract program, had been used over the past five years for purchases averaging $3,493, the Houston Chronicle reported earlier this week.

Jack Stick and Doug Wilson used it to award 21CT contracts for a $110 million Medicaid fraud detection system and a $452,000 system to track child abuse investigations.

Investigations by the Chronicle and Austin American-Statesman also found that Jack Stick once worked with a man who is now 21CT's lobbyist, and that Stick last summer tried to get the state to consider giving another data project to the company even though officials already were in negotiations with a different firm.

Neither Jack Stick nor Doug Wilson has returned repeated requests for comment. Janek also has not responded to interview requests.

Layoffs reported at 21CT

The CEO of 21CT, Irene Williams, has maintained that her company followed a process set by the state and did nothing wrong.

On Thursday, the firm announced it had laid off staff in response to the contract cancellation. Two of those who lost their jobs told the Chronicle that 52 workers - nearly half the company - were laid off.

Still, by Friday pressure was mounting for more widespread consequences.

Wilson, who has worked in state government for 28 years and was appointed to the inspector general job in 2011, was a natural target. For weeks, he and his staff have drawn criticism for going after health care providers who committed only minor missteps while not recovering much money.

A report last month found the inspector general's office was so poorly run that it might be better for taxpayers if it did not exist at all.

For lawmakers, the evidence about contract irregularities apparently was the last straw.

Earlier on Friday, state Sen. Carlos Uresti had called on Wilson to resign.

"At this point, he's lost the confidence of many members of the Legislature, and, therefore, probably the trust of the public, and he needs to accept that," said Uresti, D-San Antonio.

Two other state senators, Juan "Chuy" Hinojosa of McAllen and Joan Huffman of Houston, said they would not vote to keep Wilson on the job if Gov.-elect Greg Abbott tried to extend his appointment beyond what was a Feb. 1 end date.

"Mr. Wilson is a very nice man, but sometimes it's better to start fresh with new leadership when you're trying to reform an agency," said Huffman, a Republican on the Health and Human Services Committee. "It's certainly nothing personal about the gentleman, but sometimes it's better to start fresh."